Report urges modest impact fee increases

The Baltimore Sun

Impact fees on new construction in Anne Arundel County should be significantly increased, though more slowly and by less than sought by County Executive John R. Leopold, according to a new report by an independent panel.

The group, formed by the County Council after it balked at Leopold's proposal, questioned the assumption of a consultant hired by his administration that the county has no further room on its roads or in its schools. It found that the county services are at 80 percent capacity.

The committee recalculated residential impact fees to be 80 percent of what consultant James C. Nicholas suggested and based the increases for new homes based on square footage -- not the number of bedrooms as Leopold's legislation had done.

Nicholas' report "does not reflect reality," said Robert R. Neall, a former county executive and state senator who led the nine-member task force. "We made an arbitrary decision that it was 80 percent."

Under the current system, the fee levied on the developer of any new, single-family home is $4,904. Nicholas suggested increasing fees on a 2,500-square foot home to $16,432. The committee recommended instead increasing it to $6,573 by Jan. 15, 2009; $9,859 by 2011; and $13,146 by 2014.

For commercial properties, the panel recommended doubling impact fees by Jan. 15, then increasing them by 50 percent by 2011.

The task force was formed to study the fees created in 1987 to force developers to share the cost of the new schools, roads, police and sewers needed to accommodate the homes or offices they build. Usually passed on from the developer to the buyers, they have not been raised since 2001.

Leopold said yesterday that he was pleased that the committee recognized the validity of his consultant's report, but the proposed fee increase is too low. He said he is willing to compromise on the figures, but the fee increase needs to be done immediately.

"The fees proposed are decidedly inadequate, and the time frame recommended would only serve to aggravate a situation that has existed for 20 years," Leopold said.

In January, Leopold introduced a bill proposing as much as a fourteenfold increase in impact fees, adding $21,000 to the price of a new four-bedroom home and $1 million more for a 200,000-square-foot office complex.

The council found the fee increases too drastic and questioned the work behind them, so it commissioned its own study on March 3 by an independent committee.

Council members, who were handed the 10-page report this week, said yesterday they were still reviewing the findings but found things to like in it.

"I think that makes some sense in that we're recapturing the fees of the cost of development, but at the same time, we're not raising them [to the level] where no one is going to build at all," said C. Edward Middlebrooks, a Severn Republican.

Councilman Ron Dillon agreed that using 80 percent capacity is probably accurate considering the excess school capacity in his district. He supports spreading the increase out over five years because of the economic downturn.

"With the housing market the way it is, a phased-in approach is probably better," said Dillon, a Pasadena Republican.

Councilman Josh Cohen, an Annapolis Democrat, said the phase-in period should be shorter than five years. He said he would be working with other council members to determine how long it should be.

But he said he was heartened to find that the methodology and the numbers that Leopold used in his report were sound.

"At least getting a consensus is a major step," said Cohen.

The lower increase for commercial property compared to residential property owners was a sticking point for Councilman Jamie Benoit.

"We're not requiring enough of commercial developers," said Benoit, a Crownsville Democrat. "I'm going to spend some time exploring the rationale for that."

Commercial properties generally demand fewer services, such as increased students, and that smaller increase is reflected in the committee's recommendations, said Susan Stroud, director of operations for government affairs for the Home Builders Association of Maryland.

Association members generally regarded the initial fee increase proposed by Nicholas for residential and commercial developers as "too high and too fast," Stroud said. She said the committee's fees are more realistic and that the five-year phase-in period would allow enough builders to change home prices to recoup their costs.

Home prices are set far in advance because of contracts with subcontractors and suppliers. An immediate change would hurt builders, she said.

"It will give ample time to make the necessary adjustments in our prices and our contracts," Stroud said.

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